Tax Tips for Music Teachers
- Understand how is a Musician’s income is defined: All payments for gigs or teaching is defined as income… regardless of whether you receive a 1099 at the end of the year. Some people think if you do not get a 1099 then it is not reportable income. This is actually untrue. If you have income in any form, it is required to be reported on your Taxes!. The form 1099-MISC tax form is supposed to be filed on any payments made to an individual for services amounting to more than $600 in any calendar year.
- Professional fees: Do you have an agent or some other representation? Do you belong to the musician’s union? Have you paid an accountant to do your taxes in the past? All of these fees are deductible.
- Record your Lessons: Making an audio recording of your lessons is a great way to keep a record of when and where a lesson occurred. When you’re sitting across the table from an auditor and he’s asking for teaching records, wouldn’t it be nice to simply open up your audio recording mobile app and show him the exact dates and times of all your lessons? A free tool like LessonRecord is a quick and easy method of accomplishing this.
- Keep Track of your Mileage: Whether you’re traveling to a gig, or going to teach at a student’s home or school…these deductions can add up to a big tax savings. Be sure to keep track of the exact mileage and the type of work (teaching, performing, masterclass, etc..)
- Music Books: Have you purchased any books in the past year? Anything that you purchased for yourself has helped make you a better teacher and performer. Anything that you’ve purchased for students has directly aided your teaching. Both of these scenarios are tax deductible!
- Recordings: Anything you’ve purchased that helps you become a better musician and teacher is tax deductible…this includes recordings. Do you have subscriptions to music streaming services like Spotify? What about a Netflix subscription that you use to watch opera or orchestral recordings? You can deduct a portion (or all) of these expenses.
- Teaching Studio: If you rent a space to teach out of, that’s an easy deduction. But your home studio can be deducted as well! Portions of your utilities that support your home studio are also eligible. This can be a tricky deduction since there are strict rules around making certain that your studio is used for no other purpose than what you are claiming on the deduction. It’s definitely worth looking into though!
- Warning!: Make sure you’re not continually declaring a loss year-over-year. If your deductions are greater than the income you’re reporting the IRS could declare your music occupation to be just a hobby, subsequently denying all of your deductions!
Here is a list of Tax forms that you will need to file:
- Form 1040 – basic tax return form
- Schedule C – to report self-employed income
- Schedule SE – to pay the employer’s portion of Social Security and Medicare taxes
- Form 8829 – if you claim a home office deduction
- Form 4562 – if you claim a deduction for an instrument or computer
- Form 1040-ES – for paying quarterly estimated taxes
Here is a list of resources that can help you understand your taxes
- Self-Employed Individuals Tax Center
- Tax Guide for Small Business
- Starting a Business and Keeping Records
- IRS Tax Calendar for Small Businesses and Self-Employed
- Business Use of Your Home
- Retirement Plans for Small Business
- SEP Retirement Plans for Small Businesses
- Instructions for Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship)
- Business Expenses
- Miscellaneous Deductions
- How to Depreciate Property
- Depreciation and Amortization
- Information on Estimated Tax payments
Disclaimer: This list of Tax Tips is for informational purposes only. For professional tax advice and services please contact a licensed CPA or tax attorney.